Mumbai, March 12: Companies should take note of rising instances of social engineering frauds which usually involves telephone scams or email phishing attack and should take adequate cover to protect the company from such liabilities.
According to the largest private sector general insurer-ICICI Lombard, apart from employee frauds, these kinds of newer risks pose significant challenge for corporate India.
“There are ample instances in which companies are being defrauded through manipulation of computers or fund transfer systems. Another common scam hitting companies is social engineering frauds. So, while employee frauds remain an important risk for companies, they must also take cognizance of newer risks while buying crime insurance,” Sanjay Datta, chief of underwriting , claims and reinsurance of ICICI Lombard General Insurance, said in an email reply to The Finapolis.
In social engineering frauds, the victim is duped to reveal confidential information like a password or banking information, which are later used in transferring money illegally. Emails, phone calls, downloading unknown files are some of the tools used in these kinds of frauds.
The Indian financial system was rocked last month when the PNB scam amounting to more than Rs 12,000 crore was detected involving Nirav Modi and his associate companies. Against such big losses, the public sector lender has only bought a basic banker’s indemnity policy covering employee fraud to the extent of Rs 2 crore.
However, insurance companies have started receiving higher number of enquiries from corporate houses including banks for bigger coverage.
“We have seen an increase in enquiries by existing as well as new customers about various products such as crime insurance and credit insurance. As the size of the loss is large, boards of various organizations have taken note of the same and are reviewing their insurance coverage,” Datta said.
ICICI Lombard also said that the uptrend seen in the liability insurance premium collection in the recent time would continue in coming years.
Earlier, secretary general of General Insurance Council, R Chandrasekaran had said that Indian insurance industry provides products that cover all fraud related losses. “Indian insurance industry provides all kinds of products to cover fraud related losses. But, the decision to take the amount of cover lies with the insured party,” he had said.
According to a Ficci survey, white collar crime is the top 5 risks faced by Indian companies, which even best of internal controls, background checks and audit practices are not able to completely eradicate from the system. Therefore, crime insurance is a must to cover against losses arising out of such events, Datta of ICICI Lombard said.